IRYN NAMUBIRU IS OUR WAKE UP CALL

This week singer Iryn Namubiru made it back on home soil after a harrowing two weeks in Japanese detention. Her trip to perform in Japan went only as far as the airport where a search of her bags found her to be in possession of illicit drugs.

The singer needs to thank her lucky stars.

Asia has been fighting the drug problem for centuries – the Opium wars between the England and China in the 19^th century were over the Asian nation’s desire to stop the importation of the potent drug by British merchants. As a result of this long history many have a zero tolerance policy for the trafficking and use of illicit drugs.

China is world famous for sentencing hundreds to death for trafficking in drugs, other Asian nations also prescribe death sentences but at best long prison sentences in the deplorable conditions.

The details are still scanty about how her release came about but it probably helped that Namubiru holds a French passport.

Drug related crime has been growing steadily over the last two decades in Uganda. Anecdotal evidence suggests that we have moved from being a transit point for drugs from Asia to Europe and become consumers.

Part of the reason is that our laws against offenders are lenient with drug trafficers suffering a fine of a million shillings or a year in prison. This is ridiculous viewed against the street value of a stomach full of cocaine, which may run into billions of shillings.

Everything happens for a reason and Iryn’s experience should serve as a wake up call for our politicians and law enforcement agencies.

The drug trade does not work in isolation. The same networks used to traffic drugs are used in human trafficking, smuggling, gun running and any number of illicit trade enterprises.

To think that as long as my family and friends are drug free is to take a narrow view of the situation.

In terms of the economy the proceeds from illicit trade have to be laundered. It has been known for a long time that the land inflation in Kampala is due to hot money and is not supported by general income levels in the city. These funds distort the economy, knocking out genuine businessmen out of work and living the field open to counterfeit and substandard goods endangering the society as a whole.

But even more scary is that if these networks take route in our backyard they tend to proliferate like a virus, inserting themselves in every aspect of our lives and in extreme cases they take over whole governments.

And if you think about Uganda would be a prime candidate for takeover.

We are literally at the center of the world, with less than a day’s flying to Asia and Europe. We have relatively weak security systems. Our officials are corrupt to the gills and we have a lot of desperate people seduced by the good life and willing to do anything to make a quick coin. Our national budget is under $5b, it would take considerably less to secure this country as a illicit trade hub, a funnel for billions of dollars sloshing around in the shady underworld of drugs, human trafficking and money laundering.

And once crime takes over our streets it’s only a matter of time before its running our government, with rest of us working as indentured labourers or markets for their nefarious products.

As farfetched as this scenario may seem it has already happened in the recent past in Europe.

In Montenegro, to get around western imposed sanctions on the former Yugoslavia in the 1990s, they leased ports and airports to cigarette smugglers. With a foot in the door these gangs have never gone away trafficking in addition to cigarettes,  in women and narcotics.

Organised crime induced corruption was so bad that Italy had a warrant out on the head of former Prime minister Milo Djukanovic for his role in smuggling cigarettes.

So let Irynn’s ordeal not be in vain lets clamp down on this vice now before it spirals out of control.

THE TIME VALUE OF MONEY

They say the rich measure wealth in terms of time and the rest in terms of money.

To illustrate. One group of investors every so often get called to Rwakitura to meet the President. For an afternoon meeting they often send their drivers off on the 300-odd km by road to Mbarara. When the drivers get to Lyantonde, past Masaka, their bosses take off from their private airstrip and get to Mbarara airstrip just in time to jump into their cars for the onward trip to Rwankitura.

During the duration of the drivers’ journey the investors hold a series of meetings, probably close a few deals and attend to pressing administrative matters, activities of which will help to put a few billion shillings on their balance sheet by year end.

Not to take away from the drivers – their skill and perseverance in doing the route, but they only get a few thousand shillings as their day allowance for making the trip.

If we measure efficiency as a function of money made over time, clearly the drivers have go the short end of the stick.

To drive the point further.

Given the choice between receiving sh100m on January1st or taking the proceeds of one shilling invested at the rate of 50% a week from January 1^st to December 31^st , which option would you choose?

It seems like a no brainer. But if you chose the sh100m up front you would have forgone sh1.3b in potential earnings. Do the math!

In both cases we put an inordinate amount of value on money. In the first case we would rather jump on a taxi rather than drive because it is “cheaper” to ride in taxi, we do not factor in the lost revenue that accompanies the lost time using public transport.

In the second case we are often guilty of overestimating what we can accomplish in a short time and underestimating what we can achieve over a longer period of time exercising diligence and good sense.

These two errors in judgment cost us thousands even millions of shillings as individuals, imagine what it costs us as a nation?

The current impasse with Karuma dam is like a bad case of déjà vu.

Bujagali dam was mooted in 1995. After almost 20 years of sniping from environmental do gooders, rear guard action from our very own political elite, the ejection of one investor and the acquisition of another, the dam’s first megawatt of power hit the grid in 2011. The losses as a result of lost economic activity due to loadshedding, raising of tariffs to accommodate thermal generation power plants and the near two-fold increase in the project cost must be in their billions. Monies which would have been better spent improving health care facilities or subsidizing education or building roads.

Our inability to solve the land question is another case of time wasting. Attempts by this government to regularize the land laws started with the constitution in 1995, stumbled on in enacting the Land Act and the continued tinkering.

The lack of clarity with our land issue is frustrating commercialization of agriculture and is a main reason behind the ever widening gap between the rich and the poor. Because ownership is often unclear no durable investments can be done on it. As a result the productivity of our farms is one of the lowest in the region frustrating efforts to grow an industrial base driven by agriculture – our most logical route to industrialization. The losses in terms of lost opportunities, uncreated jobs and lost tax revenues must run into the billions of dollars not shillings.

One can throw up examples of procrastination by our country until the cows come home.

Looking back over the last 27 years it is actually amazing what has been achieved, because for instance the government did not twiddle its thumbs about key policies like privatisation and liberalization of the economy, the decision to ally with the donor community to rehabilitate the economy or the pressing forward with regional integration at all levels. Imagine if our communications were still the monopoly the government telecomm company? Or we were still laboring under some socialist model, creating no wealth and distributing the ensuing poverty? Or the movement of goods and services were still restricted in the region?

I shudder to think!

We need to generate a sense of urgency, optimize our time usage because they time and tide wait for no man.

LAND, VICTORIA AND UNSTOPABLE CHINA

Three events last week have interesting linkages with far reaching consequences for us.

The damage being meted out on Lake Victoria, President Yoweri Museveni’s shakeup in how his government is handling land issues and China’s insatiable demand for more and more resources made one seat up and take notice.

The Vision Group’s “Save Lake Victoria” project continues to highlight our wanton disregard for the lake, the source of water for the country’s largest urban centers, provides a livelihood for thousands of people on its shores and is a major factor in stabilizing the region’s climate.

Museveni, earlier this month he disbanded State house’s land unit and constituted another one in the Land’s ministry to put a stop to illegal evictions. The President then had a media event where he explained his thinking on resolving the land issues of the country.

It is to state the obvious, but how we utilize our land and water resources is not only going to make the difference whether we will become the middle income economy we envision in the next 20 years or not, but even more basically whether we will continue to feed ourselves or be racked by famine and food related instability.

The land pressure is there for all to see but the Vision Group’s project has shown that fishermen are having to rethink their lives as the lake’s fish stock have been depleted to historical lows.

Fishing communities are among the poorest in the world. They operate with a resource that is a public good, with a seemingly infinite abundance and little capital input required to make living. This gives them little to no incentive to plan and save for the future since when money runs out they just push their boats out onto the water and a few hours later are cash rich again. The disruption to their generation long way of life will come with fatal consequences.

For anyone who has been on the lake show to witness the untreated effluent we continue to dump into the lake from our factories and poor sanitation, you have to marvel that we even brush our teeth with tap water. It is so bad that National Water & Sewerage Corporation (NWSC) needs sh700b to build a new plant but more importantly to extend the pipe that draws water from the lake further out to tap cleaner water. A water remain affordable but it would be even more affordable were it not for the millions NWSC has to shell out in treatment costs.

Our land is another previously “infinite” resource that is coming under pressure from our fast growing population and inefficient use of it.

The knee jerk reaction by most is to lament our growing population and propose that we work towards slowing it down. At 3.2% growth a year we are among the fastest growing populations in the world.

The truth of the matter is that our population is growing at such a fast rate because we are poor. With poverty comes early marriages, lack of alternative recreation opportunities, low access to contraception and proper reproductive health care. Sort out the poverty and the population rate will slow on its own. This is how population growth has been slowed all over the world.

To spread out the affluence we need to more efficiently use land. And more efficiency land utilization will come with a permanent resolution to our convoluted land tenure system, which allow us to extract maximum value from the land by increasing our food production and creating more employment in related industry.

Which brings me around to China.

“China is going to eat your lunch. They’re going to make your food more costly to produce. They’re going to make water more scarce,” Michael Silverstein, a senior partner at The Boston Consulting Group (BCG) in Chicago sounded this warning to Americans in a recent edition of Forbes magazine. He might as well have been talking about Uganda.

The new food tastes and demands of the Chinese middle class will lead to hyper-competition fora commodities, and not just corn and soybeans, but I’m talking the stuff that farmers need to produce corn and soybeans: fertilizer and water,”
Silverstein said.

To illustrate. According to Forbes, in 2010 99% of China’s maize production was used as animal feed and this figure accounted for one in every five kilograms of world maize production. Maize importation to china is expected to more than double to 15 million tons in 2020.

China’s shift to a meat diet has led to a tenfold demand in water there. The linear logic suggests that as China’s middle class demand’s rise they will import more and more food and Uganda is a natural source of this new food.

Not be a doomsayer but our mismanagement of only these two resources – our water and land, means we are setting ourselves up for failure and greater instability as the rich become richer and the poor waste away.

THE MOBILE’S CREATIVE DESTRUCTION

It was a sign of the times.

Last week Samsung launched their much awaited Samsung Galaxy S4 smartphone. The S3 was already a revelation but barely two years later the South Korean company has launched an upgraded version that can all but bend this way and that and sing the third stanza of the national anthem in Korean.

A presentation of the phone’s new features lasted the better part of an hour and during all that time not a peep about the phone’s voice functionality. Makes you wonder why we still call them phones?

When current Bobby Collymore took over at the helm of Kenyan telecom giant Safaricom a few years ago he said that data services is where the business will be and that a time was coming when voice will be given away free of charge by telecom companies.

The company’s latest results point to that reality. In 2012 while revenues from voice almost touched a billion dollars, non-voice revenue came in at just under $500m but had grown by 29% from the previous year. Voice revenues grew by 13% during the same period.

Assuming both services continue growing at the same rate, in five year’s time both revenue streams will be at par. Of  course the bulk of non-voice revenues comes from M-Pesa, the money transfer part of the business.

A friend is currently touring in Europe and at the end of her day she posts pictures of what she has seen. The clarity of the pictures is such that I had to ask whether she was using her phone or not.

During the aforesaid Samsung presentation the company officials unveiled a new application in the phone which would allow up to seven phone holders to share the same music simultaneous. If you turned up the volume on all seven you would have literal surround sound system.

If ever one needed a real life example of creative destruction,  a reference to capitalism’s tendency to destroy and rebuild in order to progress, one need not look any further than  mobile telephones. They are changing the way we do things, closing down whole industries and creating new opportunities.

 There was a time when the telephone, the fax machine, the computer were three distinct devices. No not only do you find all these functions in one phone today but in addition you can have a camera, video and voice recorder, music player and radio all in the palm of your hand.

The destructive aspect of this development is quite obvious.

The music industry is suffering. Why should I get a CD or a CD player for that matter when I can download music onto my phone from the internet? What about the recreation camera industry – the mobile phone must have had something to do with the bankrupting of the industry icon Kodak recently. The financial industry will have to think long and hard otherwise there is a real danger of extinction. Now there is something called crowd funding, where people from around the world connected by the internet and source funds and provide funds to absolute strangers to further their businesses.

A report recently showed that there are up to eight million mobile accounts in Uganda, compare this with the five million accounts in our banking industry. And the amount of money being held in accounts for 30 days or more is rising.

This will have far reaching implications for many companies—If your business is cameras or fax machines or voice recorders you will want to think long and hard about the future.

Most importantly these phones will increase worker productivity and lower the cost of doing business. This could mean higher incomes for workers, more economic activity for economies and more people jumping out of poverty.

It is inevitable. You are not rich as you can because you do not know something. Some people are richer than others because they know more. The evolution of the phone to beyond a mode of communication is bridging information gaps wherever they pop up.

The question then will be how do you take advantage of this revolution. It will have to begin with embracing the technology, integrating them in our lives and being ready to do away with old ways of doing things.

Easier said than done, but there is really no choice.

UGANDA SHOULD HANDLE LAND INSTITUTIONALLY

 

This week President Yoweri Museveni disbanded the land unit operating out of state house and handed over their function to a special committee in the Lands ministry.

On Tuesday lands state minister Aidah Nantaba who heads the committee got off to a running start announcing that they had identified at least 500 land titles that should be rescinded.

The committee consists of officials from the police, UPDF, solicitor general’s office and the judicial service commission.

The committee is on some Robin-Hood mission to save peasants from illegal evictions. The minister has already cut herself out as the scourge of the large landowners, staying evictions and resettling people with much bombast and drama.

In the process the junior minister has won much popularity among the squatters and has not endeared herself to many landowners, many of whom are legitimate landowners and have been hard done by her overbearing ways.

Uganda’s land tenure system – most of which is informal and may not stand up in a court of law, is fraught with problems and is politically sensitive. It is also hampering farm productivity and holding back agricultural commercialization.

The way to handle this is to regularize the land tenure system so the established institutions like the Uganda land commission, police and courts of law can handle land issues – as they are supposed to.

As it is now by perpetuating, even accentuating, the informality of the land ownership by creating parallel structures we are doing more harm than good.

The government needs to bite the bullet. Fund the land tribunals proposed in the land law and step aside as the relevant institutions take the lead in sorting out land issues.

The challenge of course is that not only will the process of regularizing land ownership be a long and arduous process, but it might very well anger a lot of rural people who have settled on land that is not rightfully theirs and may go from land lords to squatters in a blink of an eye.

The reason there is no systematic action being taken on the land issue is the realization that these kind of “pretend” owners maybe a significant enough number as to cause a political threat. So apolitical decision has been made to kick the tin down the road, postponing any real action on resolving the issue at worst or at best employ someone to kick up a storm and make as if something is being done about the issue.

The land issue is critical for our ambitions to take this country to middle income in the next three decades, one because by regularizing the tenure system and in effect commoditizing land you can have the land becoming more productive and raising incomes of the land owners and the people they employ on the land.

And secondly, how the government handles land ownership rights sends a powerful signal to not only people wanting to go into agriculture but also to investors interested in other asset classes. The logic would go that if the government can be so blasé about land ownership what’s to stop them from waking up one day and doing the same to real estate, plant and machinery?

From a political point of view it probably not in a seating government’s interest to regularize the land tenure system. As mentioned before it may cause a lot of tempers to flare and hurt them at the polls. But also if land is regularized and taxed we can expect those unable to pay tax to sell out and migrate to the cities, fail to be gainfully employed and resort to crime and provide fertile ground for a credible opposition to launch itself from. That is politics.

Something has to give. Either the government takes the tough decisions – regularize land tenureship and tax the land, regardless of the political fallout, knowing that it will be benefit the country in the long run or go on sidestepping the issue and hold back progress for decades.